Third party distribution contracts, by the very nature of their long-term guarantees, are much sought after and hotly contested. It is thus that Mainline Carriers and Hestony Transport are tickled pink following the awarding of contracts to both companies by County Fair Foods, the largest fresh poultry producer in the Western Cape. Stephanie Platt reports on some aspects of these contracts.

Renewal of long term contracts heralds in a period of intense nail-biting for transporters. This is particularly true in the case of a third party distribution contracts where the haulier has geared up with a focussed approach to servicing a specific contract. Non-renewal of that contract can throw a company into total disarray with vehicle disposals and staff retrenchments following hot on the heels of such a disappointment.

FleetWatch has seen this happen and in some cases, it is not a pretty scene. Sure some hauliers come out of it OK by managing to adjust but others suffer badly. I recall one transporter coming within a breath away of closing his business after losing a contract from a client who had a lot of apples in that operator's basket.

On the other hand, I recall another who, although initially panicky, sat down and re-evaluated the scene. On doing so, he realised that what he was losing was not as much as what he could gain by redirecting his efforts.

"My pen had been sharpened down to a fine point by this client and I could not sharpen it further. I could have got the contract again but I decided to let it go as the client was not prepared to hike rate in line with costs," he told me. He then realigned his business, got rid of some of the vehicles used to service the former contract and is today happily servicing another sector.

The lesson that comes from this is that renewal of contacts is not only a time for clients to reassess the operation but also for transporters to reassess their commitment to that operation. Obviously the professional management of the contract during the period plays a large role in a transporter regaining that work. However, paramount to the negotiations is that a win-win outcome should prevail throughout.

Mainline Carrier's County Fair rigs. Looking good while doing the job

In the case of County Fair Foods, the largest fresh poultry producer in the Western Cape, which recently renegotiated contracts for the transport of all their fresh and frozen produce, this win-win scenario obviously reigned supreme.

Two winners
This prestige account with a company that provides 7% of the total poultry consumed in the country, was tendered for by a number of transport operators - and two came out winners.

The first was Mainline Carriers which, over the past five years, has held the contract to move all County Fair goods from their Epping Factory to retail outlets. This contract ended towards the end of last year and the company has now successfully signed a further 10-year deal with County Fair.

IMAGE Image is important to County Fair which has an obligation to consumers to ensure the product is distributed hygienically.

The second winner was Bloemfontein based Hestony Transport which got the contract for County Fair's national distribution. In addition, Hestony managed to secure the tender for the internal transport of fresh and frozen poultry from Klipheuwel to the factory in Epping.

Mike Kingston, managing director of the poultry division of Astral Foods, County Fair's holding company, explains the reasons for outsourcing such a major portion of their operation. "We have a simple philosophy. We will outsource as long as it can be done as cheaply, efficiently and with the same amount of passion as we do it. Our suppliers must always add value to our product."

The only in-house transport controlled by the company is what is termed their "farming services". Here an array of vehicles and equipment is used to convey live birds as well as in cleaning, litter control and other internal operations. Kingston says that because of the nature of these operations, they have not found a contractor that can handle the fleet of 250 vehicles as cost effectively and efficiently as they do themselves.

Mainline's contract of ten years is a long one. According to Kingston, they have entered into it because of the benefits they get from writing off the vehicles.

"We see no reason why, if a vehicle is managed properly and looked after, it cannot have a life expectancy of 10 years. At the same token though, one individual from Mainline, Shaun Kline, has made an enormous contribution toward the awarding of the contract. Since he joined Mainline midway through the previous contract, he has made all the difference in how the contract is managed and has enhanced our relationship with them."

It's a partnership
Kline, Mainline's manager, is based at County Fair. He is proud of their record and the fact that they have secured the contract for a second term. "We have an extremely healthy relationship with our client," he says. "It is a partnership which is what third party distribution should be all about."

Shaun Kline, Mainline "It's a partnership which is what third party distribution should be about."

Kingston vehemently echoes the importance of this relationship. "Customer service is everything and we get completely involved with Mainline to ensure that at point of sale, the image of County Fair comes through. We have an obligation to consumers to ensure that the product is distributed hygienically; hence we use these particular contractors. We become completely involved in a partnership and this is how we believe we have got it right." 

This relationship goes so far as to Mainline management having regular quality control meetings with County Fair's retailers thus giving a direct interface with the client's clients.

Part of the Lazer Group, Mainline has 26 vehicles on site, all of them 8 ton refrigerated vans. Ten of the original trucks have been replaced and the balance of the fleet is on a scheduled replacement policy. 

A total staff compliment of 98 works three nine-hour shifts and deliveries are made to retailers throughout the peninsula on a daily basis. Vehicles are loaded and checked during the night and leave at 05h00 for the first delivery. Fresh produce, which County Fair makes to order, is delivered at -4 degreesC and all frozen products at -26 degreesC.

Hijacking is a problem
It all sounds like a hassle free operation. However, one problem that both companies are well aware of is hijacking. As a high value, easily disposable load, this is a serious threat and Kline has set up as much security as possible. 

"All vehicles are in radio contact. Kavicom monitors our fleet and tracking is done in conjunction with Matrix. After four hijackings last year, we took a decision to fit Matrix. We saw almost immediate results when in December we had another hijacking and with the new dual system, we managed to recover the vehicle complete with its full load."

As far as expanding its operations to service other clients, Kline is convinced there is potential in this market sector.

"Using our resources within the Lazer Group - and the fact that we are a dedicated refrigerated third party distributor - we can offer a highly specialised service. We intend to remain in the refrigerated market and offer our service to other producers of perishable goods. Unlike casual vehicle sub-hire, the dedicated transport contract market is unique and offers specific applications and systems designed around each individual customer's needs. We believe we know this business and can offer the most professional service."

According to Kline, the Lazer Group regards Mainline as an equity income division. "They are not looking at return on investment in the short term. We provide long-term steady income to the group."

Only part of the journey
This is, however, only part of the journey that the chicken takes before being put into a supermarket trolley. All of County Fair's poultry is produced and slaughtered at Klipheuwel - and this is where Hestony Transport comes into the picture having taken over the contract to transport from the farm to the factory and to Epping Cold store in January. This involves moving anything from 850 000 to 1 million birds weekly.

What influenced Kingston in his dealings with Hestony is the fact he can always get hold of the boss. Hestony's is a hands-on approach.

"Hestony has been doing part of our national distribution for the past year or so and whenever I want to get hold of Etuan van der Westhuizen, the owner of the company, I can. He is permanently involved and ensures that the contracts are properly managed. That is the advantage of dealing with an independent operator."

Based on its association with Hestony, County Fair took a decision to move away from using a number of different carriers to do the national distribution of their value-added boxed lines. They have now appointed Hestony as the sole national distribution carrier. And good news for Cape Town is that the winning of the internal contract has brought a new name to the Cape transport scene as Hestony Transport has now opened in branch in Cape Town.

With prominent premises en route between Klipheuwel and Epping, Charl Coetzee manages the branch. Previously employed by County Fair, Coetzee has an in-depth knowledge of the customer's operation and requirements.

And County Fair Foods is not the only contract the company has in this part of the world. The branch does around 15 loads a week for Freshco in addition to between 25 and 40 for County Fair. This is just the beginning as both Van der Westhuizen and Coetzee feel very positive about future potential.

Not a simple shuttle run
Interesting is that although the internal transport for County Fair sounds like a simple shuttle run between two points, it is a lot more involved than that.

"We have to fit in with their slaughtering schedule which is determined by orders received on a daily basis from retailers. The factory then sets up to process each order and time is critical when it comes to fresh poultry. Whatever is slaughtered in the morning is processed for delivery by that evening. And because of the volumes along with the fact that they produce on order from retailers, supply to the factory is tightly scheduled," says Coetzee, adding that vehicles leave the farm at 05h30, making their first delivery to the factory an hour later.

Kingston equates this industry sector to gold mining. "It is an extremely price sensitive commodity," he says. "We have no control on the selling price and production is determined by supply and demand. We can therefore only look at controlling costs." 

It is some consolation that although County Fair regards transport as a direct cost, they are willing to acknowledge that efficient transport does add value to their product. In addition, they are prepared to give credit to their transport contractors for doing so. And that is what has led to the win-win relationship that exists so strongly.

Now, if only all customers would adopt the same attitude...